Zeneca's first figures please the City

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The Independent Online
ZENECA, the newly-demerged drugs and agrochemicals arm of the old ICI, pleased the market with its first solo set of results yesterday. Pre-tax profits of pounds 367m in the six months to 30 June, up 41 per cent, were rather better than expected and the shares responded by adding 24p to 646p.

Nevertheless, David Barnes, chief executive, made it clear he believed that the future remained highly uncertain, since the sector had yet to find out what shape promised US healthcare reforms would take.

'It is not yet possible to predict the longer-term consequences of the exceptional conditions in the US, and Continental European economies do not seem likely to improve in the short term,' he admitted. But he was confident that the group had the resources, skills and determination to make further progress.

As expected, Zeneca's sales and trading profit figures were flattered by currency factors following sterling's devaluation, since the bulk of Zeneca's turnover is in the US, while costs have a strong UK bias.

Total sales of pounds 2.3bn were 13 per cent higher than in the same period last year, but almost all of the improvement was the result of the shift in the value of sterling. Period-end rates swung from dollars 1.9 to the pound in 1992 to dollars 1.51 this year.

Trading profits were even more exchange rate-sensitive - at pounds 412m they were up 26 per cent, with 27 per cent exchange rate gains. Analysts focused, however, on the better-than-expected 7 per cent price and 3 per cent volume contributions. Other factors, primarily relating to disposals and destocking costs, were negative to the tune of 11 per cent.

These were widely perceived to be non-recurring, leading many - but not all - analysts to conclude growth would be stronger than expected, and a number of forecasts for next year were upgraded. Zeneca also won approval for the relatively strong performance of its newer products.

Sales of the former key drug Tenormin were down 21 per cent, but the better performance of the new pharmaceuticals meant aggregate volume growth of 7 per cent.

Asked what he thought of moves by Glaxo and Wellcome to link up with Warner-Lambert of the US, Mr Barnes insisted that Zeneca's products were much less capable of being transferred to the over-the-counter market and that therefore the company had no need of such a deal.

The interim dividend is 10.5p.

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